220. And who makes the decisions about where
that money goes?
(Mr Young) It is netted off the grant-in-aid in the
same way. So Historic Royal Palaces is not grant-in-aid funded
now because of their income and English Heritage ditto[8],
as you have heard in previous sessions here. In setting the level
of grant-in-aid for English Heritage we take account of the amount
of income they get in from various sources.

221. That, in effect, is a parliamentary or
ministerial decision? The money that is taken in from visitors
paying to visit a national property of that sort is used to pay
for that upkeep rather than out of the taxpayers' other funds
for that upkeep?
(Mr Young) Yes, indeed.

222. These properties that we are talking about
here, which have been said on various occasions to be in effect
state property, the decision on visitors' charges for those properties
is not taken by the Secretary of State?
(Mr Young) The use to which the charges are put is
taken in consultation with the Secretary of State because it is
very important that we, in our financial memorandum and the Memorandum
of Understanding with the Household, have incorporated words to
the effect that the net surplus of charges for entry into the
castle precincts will continue to be used for property services,
thereby meeting costs which would otherwise be met from the grant-in-aid.
So our grant to Sir Michael's Royal Household is conditional on
that use being made of those funds, or at least that is in the
Memorandum of Understanding between us.

223. The funds that are coming in from Buckingham
Palace, the extra funds which were to begin with given for the
work at Windsor Castle after the fire, they are now being taken
by the Royal Collection Trust for their various purposes?
(Mr Young) Yes.

224. Has that been agreed with the Secretary
of State in the same way as the Memorandum you are talking about?
(Mr Young) No, it did not have to be because we do
not pay to the trust, the trust is a charity set up for that purpose
and the Queen effectively gives it money and they use it for that
purpose.

225. There is a clear difference between the
amount of governmental/ministerial responsibility for how money
is used when it comes in through visitors to what you call a Government
owned property, a state owned property, as compared with the decision
making process when money comes in to one of these properties,
in particular Buckingham Palace?
(Mr Young) I think that is true, there are differences.

226. Should there be? It seems rather odd if
they are both state owned and they are both really state assets
because in one case there is a governmental responsibility on
how that money is used and in other cases there is not.
(Mr Young) It arises from the historical position
of the Royal Household which Sir Michael has outlined.

227. Is the Royal Collection Trust, like the
sub-body Royal Collection Enterprise Committee, audited by KPMG,
both by the same people?
(Sir Michael Peat) Yes.

228. Sir Michael, would you be happy were Parliament
to decide that like any other NDPB, and from the way you describe
it the Royal Collection Trust is in effect an NDPB, if that particular
NDPB like others were to be audited in future by the National
Audit Office?
(Sir Michael Peat) No, I do not think it is an NDPB
and I think there are differences. I do not want to go into it
in detail but I think from your previous point, that there are
differences between properties owned by the Head of State and
not owned by the Head of State, although they may not be material.
I think the National Audit Office are excellent auditors and we
would be delighted, we want the best audit we can get. I am sure
the National Audit Office would do a tremendous job.

229. From your point of view there is nothing
against Parliament deciding that in future, if they set it up
by statute, the National Audit Office should be the auditors?
(Sir Michael Peat) Yes. My only comment would be,
if they do this, that I think all charities who operate in that
way should be audited by the National Audit Office. I am not quite
sure why the Royal Collection Trust should be picked out. From
our own perspective I am sure Sir John's auditors would do an
excellent job.

230. Whose decision is it how the rooms and
flats in the various Palaces are used?
(Sir Michael Peat) Well, it is the Household's decision,
reporting to the Queen, on how they are best used to support the
Queen in undertaking her duties as Head of State and how that
is done most effectively and efficiently.

231. Is there any thought given to maximising
the visitor attractiveness of the use of the rooms?
(Sir Michael Peat) Yes, a huge amount of thought.
It is a very competitive business opening heritage locations.

232. For example, has any thought been given
toI do not knowallowing them to be used by perhaps
private parties or weddings or dances?
(Sir Michael Peat) Yes, a lot of thought and that
is suggested the whole time. The decision has been taken that
it would not be commensurate with the status and dignity of the
Head of State if the rooms are let out to the public like a hotel.

233. Has any thought been given to what the
value of that would be?
(Sir Michael Peat) I am sure that a lot of money could
be made from it to begin with, until the goose which laid the
golden egg was killed. However, no detailed thought has been given
to it because, as a matter of principle, it has been decided not
to do it. It is just like renting out anything, I am sure a lot
of money could be made initially if that is done, if Buckingham
Palace is just turned into a corporate entertainment centre.

234. This is because they are being used as
residencies part of the time by the Monarch?
(Sir Michael Peat) Why? They are not.

235. Yes, the decision you said was not commensurate
with the dignity of the Monarch.
(Sir Michael Peat) There were two questions, were
there not: whether the State rooms at Buckingham Palace could
be let out for corporate entertainment and the other question
was whether individual apartments could be rented out commercially?
The reason for individual apartments is security, primarily because
if individuals live there they come in and out. If you let out
the Palace for corporate entertainment, as the Queen has 80,000
guests coming into the Palace every year anyhow the police are
well versed at security in dealing with them. But it more difficult
when it is a free flow at all times of the night with people coming
in in cars and vans and residential issues. They are two different
issues.

236. You are saying there would not be any particular
security reasons for not renting out some of the rooms for parties?
(Sir Michael Peat) For corporate entertainment I suppose
there would not be because for a diplomatic reception the Queen
invites 1,500 people and the police take this very seriously.

237. The decision has been taken because, as
you put it, it would not be commensurate with the dignity of the
Monarch?
(Sir Michael Peat) Yes, status and dignity of the
Head of State.

238. That is because it is a residence?
(Sir Michael Peat) Because it is the official home
of the Head of State of a great nation. If the rooms are rented
out for commercial corporate entertainment, you could go along
there and have your dinner and pay £50, but when you were
invited by the Queen fulfilling her duties as Head of State because
you have done something marvellous, received a medal for gallantry,
or you are someone who should be recognised - just like the reception
she gave for the British Olympic Team, which was the last one,
two or three weeks agoit would not be quite so exciting
coming into the rooms because in fact you could have dinner there
or a drink there through corporate entertainment; in other words,
it might not be quite so nice when official guests are asked.
As far as I am aware no other country rents out for corporate
entertaining the main rooms of a great nation. I hope it does
not happen in my time, perhaps it will one of these days.

239. Indeed. You said also, to go on to a completely
different point, you have to be a bit flexible, that you sometimes
get a shock when you lift the floorboards when you are doing maintenance
on one of those properties and I can well understand that.
(Sir Michael Peat) Yes.

240. Presumably you know now that you are going
to get a shock more or less every time when you lift the floorboards
because some of these places are old and probably the floorboards
have not been lifted for some time. What sort of allowance do
you make in terms of time and cost when you are setting up a project
because you are almost bound to find something historical that
maybe English Heritage want to have a look at and that holds you
up?
(Sir Michael Peat) None.

241. You assume you are not going to have any
of these things?
(Sir Michael Peat) No, we do not believe in contingencies.
The minute you have contingencies and contingency allowances,
experience shows they always get used up. Mice get at them. So
you run it on the basis that they are meant to do the best they
can. Obviously with historic buildings it is difficult. The minute
you start having contingencies and allowances, then the people
who do the job will operate to that standard.

242. I am quite surprised you say that because
my understanding is quite a number of the projects which you run
actually came in under budget anyway.
(Sir Michael Peat) Yes, they do, a number of them.

243. So the budget is not always used up if
it is there?
(Sir Michael Peat) No, but sometimes when you look
at it you think you have your best estimate. A good example was
when we were doing some work on the roof of Windsor Castle. We
thought the whole roof needed replacing but when we looked at
the joists underneath and we looked at the lead work, it was not
quite as bad as we thought and so we saved money by just doing
repairs in specific areas.

244. Having a bit of extra money in the budget
does not necessarily mean you use it all up?
(Sir Michael Peat) My belief is that for all projects
people should proceed on their best estimate of what needs to
be done. Once you start muddying the waters with allowances and
contingencies, you are not quite so clear in what direction you
are going.

245. It is not usual, is it, in most commercial
organisations to run major projects without some sort of contingency?
(Sir Michael Peat) No, it is not, I agree, but it
is one of the reasons why I think we probably do better than most.

246. In paragraph 3.18 there are two reasons
given why things go over budget and over time. One is "...structural
work identified once the project started and areas were opened
up..." which we have been talking about. The second is "...
decisions to add minor maintenance work to projects which would
otherwise have been carried out separately...". That should
have been known about in advance surely, should it not? Why is
there not a significant reason why you should have delays?
(Sir Michael Peat) Sometimes things break down, plant
breaks down, you have problems with automatic fire detection wiring,
some computer wiring. It is the hole in the road syndrome, that
if you have dug the hole in the road you really do need to get
as much work done in that hole before it is filled in rather than
digging it and filling it in and then digging it up again.

247. You would surely normally know in advance
how much you are going to do, you do not discover that when you
dig the hole. If you have got minor maintenance work that you
know has to be done on that road you take the decision to do it
at the same time as you are doing other work.
(Sir Michael Peat) Minor maintenance work is not predictable,
a piece of plant can break at any time and issues can come to
light at any time. Obviously people like to look forward but it
would be totally unrealistic with buildings to say that everything
is known about in advance, it is not.

Mr Rendel: Thank you.

Chairman: We have a number of interesting issues,
the biggest one of which is whether the money raised, or the income
from, or benefits in kind arising from public assets amount to
public money. It is an issue that we will have to resolve in this
particular report. We will have a number of written questions
to follow on because I had to cut a number of people short today[9],
so just be aware that we will be providing them to you as your
Christmas present from this Committee. It just remains for me
to say thank you for coming and to wish you both a very Merry
Christmas and a Happy New Year and we look forward to a lively
report. Thank you very much.